PDIC’s DIF ratio within target

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Category: Banking & Finance

Published on Tuesday, 27 August 2013 19:18

Written by Genivi Factao

The state-owned Philippine Deposit Insurance Corp. (PDIC) on Tuesday gave assurance it has enough resources at its deposit insurance fund (DIF) to act as buffer against financial failure.

PDIC President Valentin Araneta said the DIF equal 5 percent of aggregate deposits as of latest and within the level considered prudent.

According to Araneta, total DIF stood at P84.236 billion as at end-2012, while the estimated insured deposits (EID) total another P1.61 trillion.

As of December 2012, the country’s total bank deposits reached P 5.7 trillion.

“The ideal DIF ratio is 5-percent and we are within that target,” Araneta said at Tuesday’s seminar hosted by the tax and audit firm Reyes Tacandong & Co.

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He said as the banking system becomes stronger and deposit the base grows, the need for deposit insurance grows with it.

“On a global basis, we compared the Philippines-PDIC to deposit insurance target of other countries and you notice we are there on the mark,” he said.

He also said the 5-percent DIF equivalent is a good benchmark for an investment rated country as the Philippines.

“As economies get more advanced in terms of credit rating, their [DIF] targets are much lower,” Araneta said.

PDIC has enhanced its ability to manage and ensure the adequacy of the DIF and improve the surveillance and oversight capabilities over member-banks and mitigate risks.

He also said the development of a uniform core-banking system for rural banks is underway to strengthen their management and accounting capabilities.

This will likewise allow for better monitoring of their financial condition and provide better service to clients down the line.

To be more operationally efficient, PDIC is also proposing a legislative amendment creating a quick-resolution mechanism for problematic banks as part of its legislative agenda.

Araneta said this will enhance PDIC’s authority to establish a flexible mechanism seen to help preserve critical banking functions by facilitating the acquisition by an appropriate body of the assets and the assumption of liabilities of a failed banking institution.